US Treasury secretary tells BBC ‘bit of pain’ worth long-term security
US Treasury Secretary: Economic Sacrifice for Long-Term Security
Scott Bessent, the U.S. Treasury Secretary, emphasized to the BBC that a “modest economic adjustment” is justified to neutralize the looming threat of Iranian nuclear strikes on key Western cities. As the International Monetary Fund (IMF) raised alarms about a potential global recession from the ongoing U.S.-Israel conflict with Iran, Bessent argued that the long-term security gains outweigh short-term financial setbacks.
“I question the global GDP impact if a nuclear strike targeted London,” he remarked. “My focus is on the broader security implications rather than immediate economic forecasts.”
Iran has consistently maintained its nuclear program is peaceful, while the UK government stated there was “no evaluation” of Iran aiming to strike Europe. Bessent, however, highlighted the significance of recent events, such as Iran’s missile activity near Diego Garcia, to underscore the country’s capability to reach major Western capitals.
IMF Warns of Global Economic Risks
The IMF’s World Economic Outlook report outlined a worst-case scenario where escalating oil, gas, and food prices could drag global growth below 2% in 2026. This would mark a “near miss” for a recession, a rare event since 1980, with the most recent occurrence tied to the pandemic.
Energy prices surged after the Iran conflict began over six weeks ago, driven by the closure of the Strait of Hormuz and stalled peace talks. The IMF warned that prolonged warfare could disrupt oil supplies as dramatically as the 1970s embargo, though current reliance on fossil fuels is less intense than before.
“Even with a conflict ending now, oil supply shocks would mirror the 1970s crisis,” said IMF chief economist Pierre-Olivier Gourinchas. “But recovery is faster today due to diversified energy markets.”
Despite recent dips, oil prices have hovered near $120 during the conflict, now settling at $95 per barrel. The IMF cautioned that a recession risk escalates if energy prices remain elevated for two years, forecasting global growth to ease to 3.1% for 2026—a slight reduction from earlier projections.
Regional Economic Projections
The UK is expected to face the most severe impact from the energy crisis, with GDP growth trimmed to 0.8% this year, down from 1.3%. Yet, the country is projected to rebound with 1.3% expansion in 2027, assuming the conflict resolves soon.
Meanwhile, Gulf oil-exporting nations may experience significant economic slowdowns, with some possibly contracting. Iran’s economy is forecast to shrink by 6.1% this year, but a recovery to 3.2% in 2027 remains contingent on the war’s resolution.
As tensions persist, the IMF noted that prolonged conflict could push inflation to 6% next year, prompting central banks to raise interest rates. However, the agency remains cautiously optimistic about global resilience despite the challenges.
